You asked what the Department of Motor Vehicles (DMV) uses to determine the motor vehicle values it reports to local tax assessors and why these amounts sometimes differ from what vehicle owners are offered when they trade the vehicles in to dealers.

SUMMARY

State law requires the secretary of the Office of Policy and Management (OPM) to choose a schedule of motor vehicle values and requires local tax assessors to use these values for assessments. OPM has chosen the appraisal guides published by the National Automobile Dealers Association (NADA) as the standard. When vehicles are newly registered, the DMV applies the appropriate average retail value from the guide for the particular year, make, and model and reports it to the local assessor. If someone disputes the value the assessor has assigned to his vehicle, he has a statutory right to appeal to the town's board of assessment appeals. The town may adjust the assessment based on the factors the vehicle owner claims reduce the retail value of his vehicle, but this is not guaranteed.

The NADA average values assume a vehicle that is in basically good condition for its age and use. The presence or absence of particular options and mileage outside of an acceptable range can affect this value. However, when someone offers a vehicle in trade to a dealer, the process by which the dealer determines how much will be offered is affected by many factors specific to the vehicle and related to the rest of the purchase conditions. It also would differ from the value used for assessment purposes because the dealer usually will offer only the wholesale value of the vehicle on a trade-in, not its retail value. In determining a vehicle's “book value” for assessment purposes, the vehicle is assumed to be typical for its type. Factors that may decrease its practical value as a trade-in, such as mechanical condition or mileage, cannot be known for every individual vehicle of its year, make, and model. These factors might come to light when an appeal is made.

REQUIREMENTS OF STATE LAW

State law requires the OPM secretary to choose a schedule of motor vehicle values and requires assessors to use this schedule for assessment purposes (CGS § 12-71d). The schedule must include the value of every vehicle currently in use, to the extent this information is available. The value must be set at 100% of the average retail price of each vehicle as of October 1 of the assessment year. OPM, in consultation with the Connecticut Association of Assessing Officers, has selected the price guides published by the NADA as the standard that must be used. Local assessors are responsible for determining the value of any vehicle not listed in the guides and any town's legislative body can change the assessment method by resolution.

The DMV merely applies the appropriate NADA average retail price to the year, make, and model of a particular vehicle and reports this to the local assessor when a vehicle is newly registered. A vehicle owner who disagrees with the value assessed to his vehicle may appeal to the town's board of assessment appeals. The board must meet at least once each September solely to hear appeals of motor vehicle assessments (CGS § 12-110). Town procedures for conducting appeals may differ.

NADA APPRAISAL GUIDES

The NADA appraisal guides are not the only source of such information, but they have historically gained the widest acceptance among government agencies, insurance companies, financial institutions, leasing companies, and other entities as a way of determining vehicle value. The NADA states that it derives the values it uses from sales records collected for each vehicle. It classifies vehicles into three categories—low, average, and high—based upon vehicle condition. After sales data is processed, NADA analyzes current market conditions pertaining to each type of vehicle to determine fair market values. NADA regional editions attempt to account for variations in geographic market conditions. NADA guides are published for new vehicles; used vehicles; classic, collectible and special interest cars; motorcycles, snowmobiles, all-terrain vehicles, and personal watercraft; marine craft; and recreational vehicles.

The law requires the assessed value for a vehicle to be its average retail price. The NADA guides define an average retail vehicle as one that should be clean and without glaring defects. Tires and glass must be in good condition and paint should match and have a good finish. The interior should have wear in relation to the vehicle's age, the carpet and upholstery should be clean, and all power options should work. Mileage must be within an “acceptable” range for the model year. NADA also calculates a vehicle's average trade-in value. The criteria for evaluating a vehicle are similar, but the published value is a national average calculated from the nine NADA regions. NADA notes that the trade-in value for a particular vehicle could be higher or lower that the national average due to local market conditions.

To illustrate how variables such as mileage can affect these values, we used the NADA website version of its appraisal guide to determine the average trade-in and average retail value of a 1996 Honda 4-door LX Sedan with air conditioning and automatic transmission at two different mileages—60,000 and 80,000. For the vehicle with 60,000 miles, the published average trade-in value was $9,275 and the average retail value was $11,225, but the 60,000 miles would add $175 to each of these values. On the other hand, the same vehicle with 80,000 miles would result in $600 deduction from these values.

WHY ACTUAL TRADE-IN VALUES MAY DIFFER FROM ASSESSMENT VALUES

When the guides are used for value reporting by the DMV for tax assessment purposes, these variables cannot be known for each vehicle being registered. However, when someone offers his vehicle to a car dealer in trade, someone at the dealership will evaluate all relevant variables such as mileage, body condition, mechanical condition, and engine performance when determining how much will be offered for the trade-in. Generally, the amount a car dealer will give on a trade-in is determined by the vehicle's wholesale value, not its retail value. The trade-in amount can be affected by other considerations associated with the deal being offered, the type of car being purchased, and other factors that may not be directly related to the condition of the car offered in trade. Older vehicles with extremely high mileage may be taken in with the intent of being sold to wholesalers for parts value rather than for resale by the dealer to an individual buyer. When a car is going to be

“wholesaled,” the dealer usually offers only a nominal amount for it, typically between $500 and $1,000, depending on the other factors involved in the sale.

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